Inspire Medical Systems, Inc.

Good afternoon. My name is Dilem, and I'll be your conference operator today. At this time, I'd like to welcome everyone to the INSPIRE Medical Systems second quarter 2024 conference call. All lines have been placed in mute to prevent any background noise. After the speaker's remarks, there'll be a question and answer session. I'll now hand the call over to your first speaker, Eski Yaja, the Vice President of Investor Relations at INSPIRE. You may begin the conference.

Thank you, Dilem, and thank you all for participating in today's call. Joining me are Tim Herbert, Chairman and Chief Executive Officer, and Rick Buchholz, Chief Financial Officer. Earlier today, we released financial results for the three and six months under June 30, 2024. A copy of the press release is available on our website. On this call, management will make forward-looking statements within the meaning of the federal securities laws. All forward-looking statements, including without limitation those relating to our operations financial results and financial condition, investments in our business, full year 2024 financial and operational outlook, and changes in market access are based upon our current estimates and various assumptions. These statements involve material risks and uncertainties that could cause actual results or events to materially differ. Accordingly, you should not place undue reliance on these statements. Please see our filings with the Securities and Exchange Commission including our Form 10-Q, which we filed with the SEC earlier this afternoon, for a description of these risks and uncertainties. INSPIRE disclaims any intention or obligation, except as required by law, to update or revise any financial projections or forward-looking statements, whether because of new information, future events, or otherwise. This conference call contains time-sensitive information and speaks only as of the live broadcast today August 6, 2024. With that, it is my pleasure to turn the call over to Tim Herbert. Tim?

Thank you, Esgie, and thanks, everyone, for joining our business update call for the second quarter of 2024. We always start our earnings call by reiterating our commitment to delivering strong and consistent patient outcomes. Our mission is to put the patient first, and we now have over 75,000 patients treated with Inspire Therapy to date. With that, let's review our results. In the second quarter, we generated revenue of $195.9 million, representing a 30% increase compared to the second quarter of 2023. Second quarter U.S. revenue totaled $187.8 million, a 30% increase over the same period last year. This revenue growth reflects greater therapy adoption as a result of increased market penetration in existing centers, as well as expansion into 81 new implanting centers in the United States and 12 new US sales territories. We now have 1,316 active US centers and 310 sales territories. Outside of the US, revenue increased 27% to $8.1 million. We saw strength in Germany, Switzerland, the Netherlands, and Belgium as the derogation authorizations allowed us to continue to grow the adoption of Inspire Therapy. With this strong start and confidence in our outlook for the remainder of the year, We are increasing our 2024 revenue guidance to $788 to $798 million, which represents 26 to 28% growth over 2023 revenue of $625 million. Net income for the second quarter was $9.8 million. Compared to a net loss of $12 million in the prior year period, representing net income per share of 32 cents compared to a net loss of 41 cents in the second quarter of 2023. Given the strong performance we have seen year to date, we are raising diluted net income guidance to 60 to 80 cents per share for the full year. We'd like to highlight some very important business updates. First, we are excited to announce EU MDR certification in Europe, which includes full body MRI compatibility. This is a very significant milestone as approval requires a stringent review and operations quality and regulatory compliance And we are very proud of our team for this achievement. As a reminder, we obtained derogation in several European countries to help ensure patient access to therapy and product continuity. With this EUMDR certification, we may now submit for approval of the Bluetooth patient remote, the updated physician programmer, and the Inspire 5 neurostimulation system. Second, we received countrywide reimbursement in France at levels consistent with other European countries. France is the second largest OSA market in Europe. Our local team is already in place, and we are ready to start reimbursed Inspire cases. And just last week, we received FDA approval for the Inspire 5 neurostimulation system. This is a significant accomplishment, highlighting many years of development and evaluation. And we are incredibly proud of the hard work across the organization. We are focused on operational readiness and building sufficient inventory to support a soft launch in late 24 and a full launch in 2025. The Inspire 5 Neural Stimulation System incorporates respiratory sensing capabilities into the IPG, eliminating the need to implant the pressure sensing lead. This will provide benefits to the patient with one fewer component, to the physician with reduced surgical times, and to the company with reduced production costs and complexity. Turning now to market access. we continue to make good progress with the predictor study and analyses. As a reminder, the initial focus with the predictor study is for patients with a lower BMI who may not have significant lateral wall collapse and therefore may not require the drug-induced sleep endoscopy or DICE. We expect to continue the analyses and move towards submission of the manuscript to a peer-reviewed publication this fall. We have already discussed the results with payers and have had several payers update their policies to remove the dice requirement. We will continue our discussions with other payers to further improve a patient's experience in obtaining Inspire Therapy. Staying on the market access front, we are pleased with the proposed 2025 national Medicare outpatient payment rates, which called for a 2% increase, bringing the hospital outpatient rate to $30,198, and a 3% increase, bringing the ASC rate to $25,620. Their proposed physician fee schedule for 2025 calls for a roughly 2% reduction to the Medicare physician fee of $837. However, we would expect the final rule to reflect a higher overall physician reimbursement rate. With respect to our market development activities, we continue to advance our medical aid education programs, and year to date, we have hosted over 150 advanced practice providers and INSPIRE training programs. The primary focus of this initiative is to improve capacity in both sleep and ENT clinics to meet the strong patient demand we continue to see for INSPIRE therapy. Further, we continue to increase our presence at primary care and cardiology conferences to drive increased awareness of INSPIRE therapy. Our direct consumer program remains strong. and provides a pathway for patients to connect with the proper healthcare providers. In the second quarter, our direct-to-consumer spend declined modestly compared to the prior year's period, as we found ways to be more targeted and efficient in our digital advertising, which has contributed to a significant increase in digital patient engagement at a lower cost. We continue to advance initiatives to improve the patient experience, and one example is we now have over 200 centers using digital scheduling to book appointments. With digital scheduling, we have observed a 60% increase in a patient's ability to schedule an appointment on their first attempt, greatly improving the patient's journey to receive inspired therapy. Switching to the recently released data from the Simone OSA trial, the data further reinforces our view that GOP1s will be complementary to our market opportunity and may provide a mechanism for patients to reduce their weight and qualify for Inspire Therapy. As you know, Inspire Therapy stimulates the hypoglossal nerves and is designed to treat tongue-based collapse. Patients with a higher BMI are more likely to experience lateral wall collapse of the airway, which is not effectively treated with hypoglossal nerve stimulation. This was further confirmed with our predictive results as discussed above. Based on the results of the Chimount OSA trial, we believe many patients who experience significant weight loss, including those who benefit from the use of GOP1s, are likely to experience a reduction in their lateral wall collapse which would allow them to qualify for INSPIRE. Please refer to our updated investor deck for third-party data on concurrent use of GOP1s and INSPIRE therapy. According to the report, over 1,500 patients in the past two years received INSPIRE therapy while actively on GOP1 therapy. Finally, we have made great strides and profitability, which we expect to continue into 2025 and beyond. Given our strong balance sheet, financial performance, and long-term outlook, we believe shares of Inspire stock represent a strong investment opportunity, and as such, today we announced our board's approval of $150 million share repurchase authorization, the first in the company's history. The program provides us with a flexible way to return value to our shareholders, including supporting our stock when we see unwarranted volatility. In summary, we remain focused on the patients to continue the growth and adoption of Inspire Therapy. We will continue to execute our growth strategy of driving higher quality patient flow increasing the capacity of our provider partners to effectively treat and manage more patients. Our key strategies include adding advanced practice providers, training and adding new implanters, increasing center independence, driving the adoption of SleepSync and our digital tools, all of which are embedded strategies and our commercial team's objective to increase provider capacity. As we move into the second half of 2024, we remain excited about our future prospects and are confident that we have the appropriate strategy in place to drive long-term stakeholder value. With that, I'd like to turn the call over to Rick for his review of our financials.